November 27, 2017
That is the question millions are asking after she made this assertion in a segment on Morning Edition today. Economists would usually look to evidence that budget deficits are creating too much demand in the economy, such as a rising inflation rate and/or high interest rates. Both interest rates and inflation are at historically low levels, with inflation consistently running below the Federal Reserve Board’s 2.0 percent target. Based on these facts, it is not clear what could be the basis of Liasson’s assertion.
In some cases, people point to the interest on the debt as a burden placed on our children. This is misleading since some of our children (or at least Bill Gates’ children) will be receiving this interest. However, even this measure does not suggest a major problem. Currently, interest payments on the debt, after netting out money refunded by the Federal Reserve Board (the government pays interest on the bonds held by the Fed, which is then refunded to the Treasury) are less than 0.8 percent of GDP. They were more than 3.0 percent of GDP in the early 1990s.
Also, if anyone is concerned about the burden imposed by these future payments, they should also be concerned about the much larger commitments the government makes when issuing patent and copyright monopolies in order to finance innovation and creative work. In the case of prescription drugs alone, the added expense of patents and related protections comes to close to $370 billion a year, or almost 2.0 percent of GDP.
Adding in the costs from these monopolies in medical equipment, software, and other sectors would almost certainly double this amount. Anyone seriously concerned about burdens on future generations would have to be noting the burdens created by patent and copyright monopolies, which swamp any plausible interest burden of the debt. The fact this is never mentioned suggests that burdens on our kids are not a major concern for people complaining about budget deficits.
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